Law Web: Bombay HC: Scope of inquiry for grant on interim compensation while granting stay to eviction decree

This Court in Previn Govind Sharma v. Dinyar Jal Jamshedji Decided on 21st June 2019 has

considered the issue in detail. After examining the above decisions besides others, it

has held that this Court under Order 41, Rule 5 CPC does not fix mesne profits per

se. If this Court indulges in a threadbare analysis and judicially determines the

relative merits of the rival mesne profits reports at an interlocutory stage—more so

under Order 41, Rule 5 of CPC—that preempts the trial Court’s legitimate

adjudicatory powers under Order 20, Rule 12 of CPC. Here, what this Court

intends, or requires, to do is to use the “commonsense which is a cluster of life's

experiences” rather than depend on the rival facts presented by warring litigants.”

Pragmatic Pursuit:

29. Then, Previn Govind Sharma has recorded what could be a pragmatic

approach. Indeed, any adjudication, if it were, under Order 41, Rule 5 of CPC

involves an element of ad hocism, a permissible level of guesswork, and a dose of

discretion. The interim compensation, I may note, is to ensure that neither party

gets an unfair advantage over the other. Either too high an amount or too low an

amount as compensation prejudices one or the other party. The whole endeavour

under Order 41, Rule 5 of CPC is to keep the rival parties on an even keel. It is a

balancing act between the competing interests of a party who secured a decree and a

party who entertains the hope of emerging successful in the appeal proceedings.

30. Order 41, Rule 5, we may note, is a step-in-aid in appeal. The respondent

has the reality of decree; the appellant the possibility of its reversal. The decree, say in an eviction suit, alters the characters of parties. The tenant is no longer a tenant;

he is, at best, an occupant. And that occupation stands branded as unauthorised.

The suspension of the decree does not obliterate the judicial findings; it only keeps

its effect—its execution—at bay. So to have a binding decision put on hold in the

name of stay, the appellant needs to submit himself to certain terms. The terms of,

for example, paying monetary compensation.

31. If we continue in the same vein, a stay is not for mere asking. Nor can the

appellant paint himself a victim under Order 41, Rule 5 of CPC. That said, I must

also acknowledge that the appellate courts will not lose sight of the distinction

between what is ideal and what is practical; what is discretionary and what is

arbitrary; what is a fair guess and what is a wild whim.

32. With the judicial overload, docket explosion, and clogging adjudicatory

avenues at every echelon, we cannot expect a minitrial even under Order 41, Rule 5

of CPC, for fixing, say, an interim compensation. It is ideal. But with the litigious

multitude knocking at the court’s doors clamouring for speedy justice, it is an

unaffordable legal luxury.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CIVIL APPELLATE JURISDICTION

WRIT PETITION NO.13100 OF 2018

Ishwarlal Vrajlal Mistry vs. Manohar U. Shetty

CORAM: DAMA SESHADRI NAIDU, J.

JUDGMENT DATE: 18th December 2019

Heard finally at the admission stage by the parties’ consent.

2. There are two writ petitions: W. P. No.13100 of 2018 and W. P. No.13102

of 2018. They both impugn an interim order passed by the Appellate Bench of the

Small Causes Court. To elaborate, the impugned orders stay the operation of the

decree secured by the respondent-landlord subject to the writ petitioners’ paying

interim compensation.

3. If I go through the details, I note that in 1961 the respondent Trust leased

out 435 sq. yards open space to the petitioners in W.P. No.13100 of 2018. The

Petitioners could raise a structure and use it for the next 40 years. A formal

agreement, it seems, was executed in 1964. Both the Trust and the petitionersoriginal

tenants agreed that the tenants could construct four floors, that is groundplus-

three floors. The initial lease was 40 years, to be renewed one more term: 40

more years.

4. During the lease period, in 1963 the original tenant raised a structure. He

constructed five shops on the ground floor and started using three upper floors as

lodgings for prospective customers. Similarly, the Trust has leased out the terrace

portion of an existing building in the same compound and permitted the original

tenant to raise one more floor. That newly to-be-added floor could be used as a

residence. Besides that, it has also leased out three garages near the existing

building.

5. The lease ended in 2001. Meanwhile, the Trust assigned its leasehold

rights to the original respondent, whose legal heirs are now on record. In 2005, the

respondent assignee filed RAE & R Suit No.68/120/2005. He sought the tenants’

eviction on the grounds of illegal subletting and change of user. Later, he has also

filed RAE Suit No.79/124/2008, about the same property. This time the eviction

was sought because the tenant’s sub-lessee has been using the property for illegal

and immoral purposes. Eventually, on 30th January 2018, the trial Court decreed

both the suits: eviction was ordered.

6. Aggrieved, the original lessees filed four appeals, but they challenged the

judgment only in Suit No.79/124/2008. Similarly, the alleged sub-lessee, that is the

second defendant, filed Appeal No.160/2018. He, too, challenged only one

Judgment, the Judgment in RAE Suit No.68/120/2005.

7. In two appeals, they wanted the appellate Bench of the Small Cause Court

to stay the operation of the decree in both the suits. Then, the appellate Bench,

through impugned orders, stayed the decree subject to a condition: the tenants, as

the appellants, should pay the monthly compensation at the rate determined by the

appellate Bench. In this background, the appellants filed two writ petitions—WP

No.1300 and 1301 of 2018—against the orders in the two appeals: Appeal

No.160/2018 and 161/2018.

Submissions:

Petitioners:

8. Shri Godbole, the learned counsel for the petitioners in both the writ

petitions, has submitted that the Trust itself was a lessee; it is not the owner. It has,

thus, subleased the property to the petitioners. Drawing my attention to the lease

agreement, Shri Godbole has argued that what was given to the petitioners was a

piece of open land, upon which, by expending huge amounts, the original tenant

raised superstructures. Therefore, considering the nature of the property leased out,

the appellate Bench ought to have determined the compensation. Plainly put, the

interim compensation must have been on the vacant land, but not on the structures

the original tenant has raised.

9. Shri Godbole has emphasised the case holding of Atma Ram Properties

(P) Ltd., v. Federal Motors (P) Ltd.[1], and submitted that whatever structure the

original tenant has raised would amount to an improvement on the leased property

by the tenant. And, while determining compensation, the courts must exclude those

improvements from the reckoning. Finally, he has submitted that the appellate

Bench has considered even the staircase, passage, actual carpet area, and so on,

which is impermissible. So, Shri Godbole asserts that the compensation fixed is

exorbitant.

10. Shri Godbole, in the alternative, has submitted that the appellate Bench

missed out on the vital aspects of the property when it determined the

compensation. Then, he has repeatedly stressed, what he calls, the best course of

adjudication for this Court: remanding the case to the appellate Bench for a fresh

reconsideration, keeping in view not only the ratio of Atma Ram Properties (P)

Ltd., but also the Judgment of this Court in Chandrakant Dhanu vs. Sharmila

Kapur[2].

11. Eventually, Shri Godbole has submitted that the petitioners have placed

no material before the appellate Bench for it to justify the compensation. According

to him, even the valuation report the lessors have placed before the appellate Bench

is exaggerated and lopsided. To justify the lessees’ demand for remand, Shri

Godbole assures the Court that the lessees will continue to pay the compensation

determined by the Appellate Bench until it reconsiders the issue.

Respondents:

12. Shri Vernekar, the learned counsel for Respondent Nos.1A to 1D has

submitted that the appellate Bench has considered all aspects, including those

suggested in the valuation report. The valuation report, according to him, showed

1 (2005) 1 SCC 705

2 2009 (2) Mh.L.J. 243

certain rates as plausible rates of rent the property could fetch. But the appellate

Bench has disregarded them all and fixed the compensation at 50% of what has

been suggested by the valuer. Thus, it has applied its mind and arrived at a rational

rate.

13. Shri Vernekar has also submitted that this Court in Super Max

International Pvt. Ltd. v. State of Maharashtra[3], has held that the property is

expected to fetch returns, at least, @6% of the value reflected in Ready Reckoner. If

we go by the interim compensation fixed by the appellate Bench, according to him,

the proportionate valuation the appellate Bench has taken is not at all exorbitant. In

this context, Shri Vernekar has also pointed out that the properties are used for

commercial purposes. And considering their use and potential, the appellate Bench

has duly noted these aspects and fixed the compensation. At any rate, Shri Vernekar

has submitted that the appellate Bench had exercised its discretion, which this

Court ought not to disturb, for there are no compelling reasons to do so. Thus, he

has urged the Court to dismiss the writ petitions.

14. Heard Shri Godbole, the learned counsel for the petitioners; and Shri

Vernekar, the learned counsel for the respondents.

Discussion:

15. There is neither factual nor procedural controversy here. The landlords

succeeded in their suit for eviction; the tenants and those claiming through those

tenants have challenged the judgment and decree of eviction. In the appeal, the

appellate Bench of the Small Cause Court stayed the judgment and decree. And that

stay was subject to a condition: the appellants must pay monthly interim

compensation to the landlords for the use and occupation of the leased properties.

The dispute has arisen about the quantum, in fixing which the appellate Court has

3 2009 (2) BCR 789

exercised its discretion. Has it exercised its discretion perversely or without

justification? That is the question I must answer.

16. One of the tenanted buildings is on a plot of 435 sq. yards; the whole

structure is called “Arunoday.” It has a ground floor with five shops, besides three

upper floors. Another tenanted building is “Marble Arch’’; its third floor is the

tenanted portion, for the original tenant was permitted to build on the terrace of the

second floor. Besides, there are three garages.

17. The tenancy began in 1961, and the lease was entered into in 1963. It was

for 40 years, extendable by one more term of the same period. Both the original

lessor and the original lessee are no more; their legal representatives are litigating

now. Besides, a third party—that is a sublessee or a trespasser, as the courts to decide

—has also been in the fray.

18. We need not refer to the rival contentions on the merits of the case: the

alleged breach of lease conditions, illegal subletting, unauthorized—even immoral

use—of the leased property, and so on. We will confine our discussion to the

interim compensation: to be specific, its quantum. But before proceeding further,

we will examine the precedential position, for the appellants have heavily relied on

them. Earlier this Court in Suhas Janardan Chavan v. Rajesh Housing Pvt. Ltd.,Judgment, dt.28.08.2019, in WP No.9384 of 2018 & Batch

has examined threadbare most decisions affecting the question of interim

compensation. I will substantially reproduce the Court’s observations then made.

19. Invariably, as Order 41 Rule 5 of CPC mandates, the mere filing of an

appeal does not arrest the operation of the decree. But pending the appeal, if the

decree was executed, that would render the appellant’s possible success in the appeal

nugatory—an empty formality or ritual. So the Code, under Order 41, Rule 5,

contemplates or provides for maintaining status quo ante until the suit proceedings

reach their logical conclusion. For the appeal is in continuation of the original

proceedings. But that prohibition of the statute quo ante comes with conditions

attached, including compensation, as stated in Order 41 Rule 5(3)(c) of CPC. In

this statutory backdrop, let us examine the precedential position.

(a) Atma Ram Properties:

20. In Atma Ram Properties, the Rent Control Tribunal ordered the

respondent-tenant to pay interim compensation at a particular rate for its staying

the decree. The tenant challenged it before the High Court; he contended that the

Tribunal ought not to have required him to deposit more than the contractual rent.

The High Court accepted that contention; it modified the stay order. So the

appellant-landlord went to the Supreme Court.

21. In Atma Ram Properties, the Supreme Court observed that “the litigation

goes on for an unreasonable length of time and the tenants in possession of the

premises do not miss any opportunity of filing appeals or revisions so long as they

can thereby afford to perpetuate the life of litigation and continue in occupation of

the premises.” It has, then, observed that once the lease or tenancy stands

determined, say, through a decree from a competent court, the tenant’s right to

continue to possess the leased property ends. And for his continued use and

occupation of the property for any period thereafter, he must pay damages at the

rate the landlord could have let out the premises if there had been no tenant or the

tenant had vacated with the lease termination. Thus, Atma Ram Properties has

summed up the principles of interim compensation:

(1) while passing an order of stay under Rule 5 of Order 41 of the

Code of Civil Procedure, 1908, the appellate Court does have

jurisdiction to put the applicant on such reasonable terms as would in

its opinion reasonably compensate the decree-holder for loss

occasioned by delay in execution of decree by the grant of stay order ,

in the event of the appeal being dismissed and in so far as those

proceedings are concerned. Such terms, needless to say, shall be

reasonable;

(2) in case of premises governed by the provisions of the Delhi Rent

Control Act, 1958, in view of the definition of tenant contained in

clause (l) of Section 2 of the Act, the tenancy does not stand

terminated merely by its termination under the general law; it

terminates with the passing of the decree for eviction. With effect from

that date, the tenant is liable to pay mesne profits or compensation for

use and occupation of the premises at the same rate at which the

landlord would have been able to let out the premises and earn rent if

the tenant would have vacated the premises. The landlord is not

bound by the contractual rate of rent effective for the period preceding

the date of the decree;

(3) the doctrine of merger does not have the effect of postponing the

date of termination of tenancy merely because the decree of eviction

stands merged in the decree passed by the superior forum at a later

date.

(italics supplied)

(b) Super Max International:

22. In this case, a three-Judge Bench of the Supreme Court had a reference

before it. The reference was because of what was felt to be a conflict between two of

its Division Bench decisions: Atma Ram Properties and Niyas Ahmad Khan.

23. Then, Super Max International has held that there was no conflict

between Atma Ram Properties and Niyas Ahmad Khan v. Mahmood Rahmat Ullah

Khan[5]. In Atma Ram Properties the landlord challenged the restriction that he

should not withdraw the amounts the tenant deposited pending the appeal. The

High Court allowed his application under Article 227 of the Constitution of India.

The Supreme Court restored the Tribunal’s order: the landlord should not

withdraw the amounts. In Niays Ahmad Khan, the High Court awarded enhanced

interim compensation unasked for. In that factual backdrop, the Supreme Court has

disproved the High Court’s approach.

5 (2008) 7 SCC 539

24. In the end, after exhaustively analysing the issue of interim

compensation, Super Max International has held that “in an appeal or revision

preferred by a tenant against an order or decree of an eviction passed under the

Rent Act, it is open to the appellate or the revisional Court to stay the execution of

the order or the decree on terms, including a direction to pay monthly rent at a rate

higher than the contractual rent.” That said, it has cautioned that in fixing the

amount, “the Court would exercise restraint and would not fix any excessive,

fanciful or punitive amount.”

25. Then, Super Max International has held that the amount fixed by the

court over and above the contractual monthly rent, ordinarily, should not be

directed to be paid to the landlord during the pendency of the appeal/revision. The

deposited amount, along with the accrued interest, should only be paid after the

final disposal to either side, depending on the result. If the Court finds it just and

expedient that the amount fixed by it should go to the landlord even while the

matter is pending, it must be careful to direct payment to the landlord on terms so

that if the final decision goes in the tenants’ favour, he can recover the amounts

with no undue delay or complication.

(b) Chandrakant Dhanu:

26. In Chandrakant Dhanu v. Sharmila Kapur 2009 (1) Bom CR 698

, the petitioners-tenant

suffered a decree of eviction. In the appeal, the appellate Bench of the Court of

Small Causes, fixing Rs.50,000/- as the monthly compensation for the tenant to

pay as a precondition to have the decree stayed. Aggrieved, he filed a writ petition

before this Court.

27. Chandrakant Dhanu, per a learned Single Judge, holds that “there is no

question of fixing any compensation without any basis. The burden is on the

landlord to prove his claim of fair and reasonable compensation by putting the

material on record, including expert opinion report and other such instances etc.” It

permits the tenant, too, to show the contra material, if any.

What is determined now?

28. This Court in Previn Govind Sharma v. Dinyar Jal Jamshedji Decided on 21st June 2019 has